Goals Relevant to Structure

1
Goals Relevant to Structure

• Efficiency
• minimize costs, time, effort
• Coordination
• coordinate diverse organizational tasks
• ease information flow
• Adaptation/Flexibility
• scan environment
• change to meet environmental needs

2
Groupings/Departmentalization

• By task
• Functional
• By outcomes
• Product
• Customer
• Marketing Channel
• Geography

3
Org. Structure Characteristics

• Formalization
• reliance on formal rules and procedures
• standardization
• Centralization
• chain of command, span of control
• vertical complexity, vertical linkages
• Differentiation
• division of labor (work specialization)
• departmentalization
• horizontal spatial complexity horizontal
  linkages

4
VERTICAL LINKAGES
Vertical information systems
High
Add positions to hierarchy
Rules and procedures
Degree of Vertical Coordination and Control
Required
Hierarchical referral
Low
Low
High
Information Capacity of Linkage Mechanism
5
HORIZONTAL LINKAGES
High
Teams
Full time integrator
Task forces
Degree of Horizontal Coordination Required
Liaison roles
Direct contact Mutual Adjustment
Paperwork
Low
Low
High
Information Capacity of Linkage Mechanism
6
Mechanistic vs. Organic

• Highly formalized
• Highly centralized
• High vertical complexity often horizontally
  complex

• Low formalization
• Decentralized
• Low vertical complexity tend to be less
  horizontally complex

7
Structural Requirements for Porters Competitive
Strategies

• Cost Leadership
• Goals efficiency, then coordination, then
  adaptation
• functional efficiencies, tight control
  (formalized job responsibilities, centralized
  decision making)
• Differentiation
• Goals coordination or adaptation, then
  efficiency
• strong coordination among functions (divisional
  structure) fast (decentralized) decision
  making
• ability to adapt to changes in technology or
  product characteristics, and changes in customer
  or geographic preferences (divisional structure)

8
Organizational Design Types

• Simple
• low formalization, high centralization, low
  specialization, low complexity
• Bureaucracy
• high formalization, centralization, and
  specialization high complexity
• Functional or divisional structure
• Hybrid
• Matrix
• functional specialists work on one or more
  projects led by project managers

9
MATRIX STRUCTURE
President
Director of Product Operations
Vice-President Design
Vice-President Manufacturing
Vice-President Marketing
Controller
Procurement Manager
Product Manager A
Product Manager B
Product Manager C
Product Manager D
10
Restructuring Examples

• Ford Motor Company (Nasser, CEO)
• Shift from functional structure (9-27-99) to
  strategic business units (Ford Car, Ford
  Truck, Mercury)
• What will be gained?
• Microsoft (Gates, CEO)
• New strategy giving people the power to do
  anything they want, anywhere they want, and on
  any device (5-17-99)
• Shift from product divisions (OS, applications)
  to 6 customer groups (corporate, knowledge
  workers, consumer windows, commerce, software
  developers, home retail). What will be gained?

11
More Restructuring Examples

• Proctor Gamble (Jager, CEO)
• Shift from geographic divisions to 7 product
  divisions (e.g., Baby care, Beauty care, Food
  beverage)
• Responses to international retailers (WalMart)
  that are pushing suppliers for standardized
  worldwide pricing, marketing, distribution
  (11-98)
• Mattel (Barad, CEO till 2/3/00)
• Consolidation of several product divisions into 4
  brands (Barbie, Hot Wheels, Matchbox,
  Fisher-Price)
• Speed decision making (faster marketing,
  manufacturing, distribution) (9-16-99)

12
PRODUCT
CEO
Product Line 3
Product Line 2
Product Line 1
CUSTOMER
CEO
Customer Group 3
Customer Group 1
Customer Group 2
GEOGRAPHY
CEO
Eastern US
Western US
Canada
13
Take Home Points

• Understand three goals of structure
• Understand basic organizational structure
  concepts and their relation to environment and
  strategy
• Differentiate between mechanistic and organic
  forms
• Differentiate between different design types